Australia's Indian summer

Overseas movers

By June 2023, Australia had 8.2 million residents who were born overseas, representing some 30.7 per cent of the resident population, according to the Australian Bureau of Statistics (ABS).

It was the first time that more than 30 per cent of the population was born in other countries since the years after the gold rush in the late 1890s...and the figure may well prove to be higher again today in 2025.

Source: ABS

As the older post-war 'ten pound Poms' drop off the perch, the number of English-born Australians has been in a steady decline over the past decade, falling from over 1 million in 2013 to 962,000 in 2023.

Most new arrivals come from more proximate Asia these days, and this trend looks set to continue over the decades ahead.

Source: ABS

While China has been a huge part of the Australian demographic story since the Millennium, the relationship between the two countries - which had thrived during the Rudd years - has since cooled somewhat. 

Source: ABS

Looking ahead, the bigger driver of population growth in Australia appears set to be India (and Nepal).

Source: ABS

The number of Indian-born Australians increased from 378,000 in 2013 to 846,000 by 2023, so it's quite likely that India is now the dominant overseas country of birth in Australia.

India's population is around 1½ billion, and unlike many other countries, it is still growing quickly. 

Topical trends

This was again brought to mind over the past week or so as a debate erupted in the US over the role of H-1B visas, some 72 per cent of which are issued to Indian citizens (with a further 12 per cent issued to Chinese nationals.

The American debate will be resolved in its own time, but what of Australia?

Well, you only have to look at how quickly the Australia-India Test matches in Melbourne and Sydney have been selling out to gauge how significant this demographic shift has already become in Australia's capital cities.

The Melbourne Boxing Day Test Match shattered the world record for Test Match attendance over the course of the five days, with a grand total of 373,691 cricket fans cheering along.

The Sydney Test has already broken the day one attendance record with 47,566 turning up, although this Test Match probably won't run for the full five-day duration after a batting collapse on the first day.

Over the past year, the respective Prime Ministers of Australia and India have been working closely to increase the trade and population links between their countries, and to foster the relationship between the two.

In 2024, Indian PM Narendra Nodi visited Australia and agreed the Australia-India Migration and Mobility Partnership Arrangement, to promote "the two-way mobility of students, graduates, academic researchers and business people."

A new centre for Australia-India relations is to be headquartered in Parramatta in Sydney.

Indian professionals under the age of 30 will be allowed to live and work in Australia for two years without a sponsoring employer, reported The Australian. 

The Australia-India Economic Cooperation and Trade Agreement (ECTA) also allows 1,000 Indian travellers places for Work and Holiday programmes.

India had looked set to overtake China as the number one source of international student visas, though it's not yet clear how the enrolments cap will impact student visa figures in 2025 (though, notably, Indian students will specifically be exempt from changes to post-study work rights). 

It's generally believed that the goal of many Indian students is subsequently to obtain Australian residency. 

Real estate data portals reported a large increase in property searches from India in 2024, both to buy and to rent, the sort of electric trend that was previously more common from Chinese real estate investors. 

While China remains Australia's number on destination for commodities exports, looking ahead it is India that will likely dominate demographic trends Down Under. 

Home values run out of 2024 puff

Rents and prices ease in Q4

Housing values recorded their first decline in two years, falling slightly by -0.1 per cent over the month of December 2024.

Over the fourth quarter, Melbourne prices fell by -1.8 per cent, accounting for most of the decline, while the more expensive houses in Sydney drove a decline for the harbour city of -1.4 per cent in the final quarter of the year (albeit, Sydney overall still finished the year in positive territory).

The most affordable quartile of the market recorded the highest price growth over the year (and the most expensive quartile was the worst performer).

The other capital cities to record a fall in prices in 2024, aside from Melbourne, were Canberra and Hobart. 

Perth, Adelaide, and Brisbane, on the other hand, notched double-digit percentage gains. 

The housing basket has been one of the key drivers of consumer price inflation over the past year or two, but it looks like rents have now levelled off completely, as household sizes increase to combat expensive rental markets. 

There has also been some evidence to suggest that new home price inflation has moderated.

Overall, inflation for the December 2024 quarter looks set to come in at around just 0.2 per cent - partly due to government subsidies - suggesting that interest rates may be cut at the first sign of a deterioration in the jobs market. 

Some commentators and economists this week have highlighted the lower Aussie dollar as a reason to keep interest rates on hold, though markets are leaning towards a possible cut as soon as February 18 (with a cut fully priced in by May 2025).

The Aussie dollar is trading at 62.13 cents versus the US dollar, well down from recent highs, but for now is still broadly within a similar trading range to what's been seen over the past 2½ years. 

In part the lower dollar itself reflects the expectation of lower interest rates in Australia - so to some extent it's a cause and effect thing - but the move lower is also reflective of recent policy shifts in the US, and a sharp slowdown in China's economy.

Construction cost inflation to ease

Profit margins for construction firms are currently running at very low levels of around just 2 to 3 per cent, while the sector is accounting for over ¼ of all insolvencies. 

With little incentive to commence new apartment projects, and with softening government demand for infrastructure projects, construction cost inflation is expected to ease in 2025. 

Project forecasts by Altus Group suggest that construction cost inflation, which ran very high in 2023 and 2024, should gradually ease in 2025 and beyond:

Enterprise bargaining agreements mean that wages growth in the construction sector is likely to remain relatively elevated until at least 2028.

Queensland is still likely to see a high level of demand for new housing and through the lead-up to the 2032 Olympics, so cost pressures may remain intense in the Sunshine State. 

High construction costs mean that housing shortages are expected to persist in 2025, noted CoreLogic.

Population Statement 2024, and future trends

2024 population trends

It couldn't have come out all that much later in the year, but the Treasurer released the 2024 Population Statement last week. 

Let's take a very brief look at a few of the highlights.

After a couple of years of unprecedented population growth totalling around 1.1 million, population growth is projected to 'slow' to around +444,000 in 2025, before - claims the government - normalising to lower levels from 2026 onwards.

The overall stated goal is to tackle the ageing of the Aussie population with an ongoing aggressive immigration program, with the number of temporary visa holders hitting a record high of 2.4 million this year.

The bulk of the future population increase is expected to be generated via net immigration.

Looking further ahead, even though the rate of population growth is projected to slow, the total population is expected to balloon to above 41 million (from around 27 million today). 

After an unusual few years - where the population first moved outwards and then began to reverse towards the capital cities in 2024 - looking ahead capital city population growth is expected to grow at around twice the pace of regional Australia. 

In New South Wales and Victoria 85 to 90 per cent or more of immigration heads directly for the capital cities.

Queensland has been the one state to grow its regional cities significantly, but even there Greater Brisbane is expected to become home to over half of the state's population for the first time since 1978.

In turn this has led to some skills shortages in regional Australia, which need to be addressed, potentially via some deliberate policy shifts (something I wrote about in far more detail in the Quarterly Essay, published in bookstores this year). 

Over the course of the decade ahead, Sydney's population is expected to balloon from 5.3 million to 6¼ million, with Greater Melbourne set to overtake Sydney as the most populous city fairly soon thereafter. 

The housing shortage is thus likely to continue through the remainder of the decade. 

The Population Statement notes that the global population is expected to peak at 10.3 billion in 2084...but population growth in Australia is projected to continue, which just about sums it all up.

MOAR!

You can read the Population Statement here.